Dáil Éireann debate -
Tuesday, 14 Dec 1999

Vol. 512 No. 6

Private Members' Business. - Social Partnership: Motion.

Mr. J. Bruton

I move:

"That Dáil Éireann

–noting the contribution which the process of social partnership, involving successive Governments, has made to national economic and social development in recent years;

–conscious of the importance of a successor agreement to Partnership 2000 being negotiated and agreed at the earliest opportunity;

–conscious of the need for the Government's stance in the negotiations to be underpinned by policies based on equity and fairness, respect for all forms of work, paid and unpaid, well paid and less well paid;

–deplores the introduction of suspicion and uncertainty by the Government to the talks process so far; and

–calls on the Government to take the necessary steps to reassure the participants in the talks of its good faith and restore the degree of trust and confidence essential for any negotiations to be successful."

I propose to share my time with Deputies Noonan and Yates.

An Leas-Cheann Comhairle

Is that agreed? Agreed.

Mr. J. Bruton

Fine Gael is moving this Private Members' motion tonight because the Taoiseach and the Government have recklessly jeopardised social partnership in three ways, the first of which is by introducing one of the most unfair and divisive budgets ever seen in this House which neglected the needs of low paid workers and spuriously differentiated between different forms of work. The budget is unfair because it makes a family on £10,000 a year just £4 per week better off and a family on £50,000 a year £50 a week better off.

Second, the budget was undermined by stealth from within the Government. As a result, the Government has resorted to the use of sticking plaster solutions to deal with the public outrage which the budget generated originally. In orchestrating this unravelling of the budget from within, the Taoiseach demonstrated a degree of contempt for the work of the Minister for Finance which shows he has no confidence in him.

Third, the Government has jeopardised social partnership by making new spending commitments, which have already added an additional £250 million pounds to the figures announced on budget day, and by making further and to date unspecified promises in the form of nods and winks to different groups. In this way the Government has effectively abandoned the basis on which the fiscal plans for the year 2000 were so recently presented to the House.

This is no way to create or maintain social partnership. Social partnership requires confidence. It requires a sense that those who are being paid to be in charge of the nation's affairs are actually in charge of them, have a sense of where they are going and have sufficient belief in what they are doing that, having made the decision, they can adhere to it. Prior to that, however, it requires that they make a decision which is fundamentally fair and takes account of the needs of the country.

The truth, which this budget shows, is that the Government has lost its political touch. It is a Government which is unable to understand fully the consequences of the actions it takes. It is quite surprising that this should happen in the third budget of a Government. One might expect errors of this nature and magnitude in the first budget of a Government by Ministers who had no experience or knowledge of the consequences of decisions or of the workings of public administration, yet it is in its third budget that the Government has plumbed the depths of incompetence in preparing the budget. No hyperbole would be an exaggeration of the folly of presenting a budget which has had to be amended so quickly after it was presented by the very people who introduced it. That creates a sense in the public mind that the people who are increasingly being paid good salaries as Ministers are not actually up to the job. The role of a politician in public administration is to understand public opinion and to ensure that what is produced administratively is acceptable and tolerable to public opinion. That is the role of the politician as distinct from the role of the economist or the Secretary General. It is a political failure which has led to this budget. It is fair to say, even though it is harsh, that the Taoiseach, the Tánaiste and the Minister for Finance are political failures in the way in which they handled this budget. They have shown that they are out of touch, unable to understand the consequences of what they are doing and, above all, and this is what makes it quintessentially a political failure, do not understand public opinion.

The Taoiseach has publicised the fact that he does a bit of recreational running from time to time but he has never had to run as fast as he has had to run in the past week to catch up with the problems he has created for himself by his unbalanced, unfair and continuously unravelling budget. The news that a further £125 million is to be spent on social welfare will help some people on low incomes, but the Government could have achieved a much better result if it had taken Fine Gael's advice and exempted all taxpayers under £170 a week from income tax.

Patching up the budget by instalments damages the credibility of the Government. It damages confidence in the budgetary process and invites further pressure from other groups. How is one to explain to the handicapped, to low income farmers and to those deprived of medical cards that there is no money for them when the Minister for Finance is so visibly giving in to one demand after another once it is made with eloquence from the Leinster House plinth? Inevitably, any package the Government now provides is bound to be full of anomalies.

It is women at work who have been most deeply betrayed by this budget. Women make up three quarters of those who are paid below the minimum wage of £170 a week. We want to exempt all those at or below the minimum wage from tax and this Fine Gael plan would disproportionately benefit women at work. In the context of the resources available to it, it is a disgrace that, whereas Fine Gael was providing for an exemption from income tax of wages up to £170 per week, the Government only increased the exemption from £100 to a mere £110 per week. In the Fine Gael draft budget we also provided £25 per week for the mothers of children under the age of five, specifically to meet the child care costs of all women. In contrast the Government's increase in child benefit was a paltry £2 per week.

My party and I strongly support social partnership, but it is not possible to build a true social partnership on a foundation which devalues the work of the low paid by giving radically larger concessions to the better off. This budget does ten times as much for the three car, three holiday family as it does for the average middle or lower income family, whether that be a single income or a double income family. That unfairness does not help social partnership.

I have explained to the Irish Congress of Trade Unions and the Irish Business and Employers Confederation the depth of Fine Gael's objection to the fundamental alteration of the tax system on the basis of which the current Administration is now attempting to negotiate a social partnership agreement. I know that both organisations respect the right of Dáil Éireann to change tax policy and it is important, therefore, that in their negotiations they should take into account the different approach to tax policy which Fine Gael, as a potential part of an alternative Administration, would pursue. It is important that employer and trade union leaders should take account of the risks in any agreement, if the assumptions of that agreement are based on a tax system for which there is not a tolerable measure of support in Dáil Éireann. A manufactured industrial relations consensus, which does not rest on a genuine social and political consensus, cannot stand. There is no genuine, social or political consensus around the budget. That is the flaw at the heart of current attempts to negotiate social partnership. The Government's proposals with regard to spouses working in the home have been well discussed already. A constitutional action is a certainty. It is not good for the country that a key element of the Government's tax policy should be the subject of such deep constitutional doubt, as is this year's budget. Ireland has been a success in economic terms precisely because our tax policies have been predictable and based on consensus and partnership. A potentially unconstitutional income tax policy is, by its nature, deeply uncertain. Its survival will depend on the uncertain outcome of a Supreme Court case.

Ireland has been able to get investment from overseas because we have provided certainty in regard to our tax code. By introducing a deep-seated constitutional uncertainty into our personal income tax, which must be collected under PAYE by businesses, the Government is creating a wholly unnecessary uncertainty that will be very bad for economic development and social partnership.

One of the reasons for Ireland's economic success is that Government and Opposition – when they alternate in Government – have been able to pursue tax policies that are consistent with one another and which represent an organic development of what has gone before. While major differences in priority have been given to concessions in particular parts of the tax code between Government and Opposition as they alternate, the system of taxation itself has always been one on which, up to now, there was a tolerable degree of cross-party consensus.

Let me say clearly to the Taoiseach and his Government that there is now no consensus between Government and Opposition on the fundamental approach in this budget to the income tax system and the way it treats families. Fine Gael will do everything it can to put right the divisive restructuring of the tax system still contained in the budget. We will not rest until equality between families is restored. Since no one would wish to take away benefits already given to two-income families, any equalisation to restore equity to single-income families will require extra resources.

I deeply regret having to say this because I know that a measure of consensus between Government and Opposition is helpful to social partnership. There can be no consensus, however, between my party and Fianna Fáil or the Progressive Democrats on the basis of the fundamentally unjust policies contained in the budget. The Government parties have attempted to divide women between those at work and those at home, and between those with young children and those whose children have been reared. This is part of a manipulative political culture which sees voters as categories to be exploited for political gain.

There is in reality no conflict of interest between either category of women, nor should there be. By its budgetary strategy, however, the Government has set out to create such a conflict and, in part, it is succeeding. On the other hand, social partnership at its most profound level includes partnership between men and women, between those at work and those at home, and between those on low incomes and those on higher incomes. The budget contains no underlying concept of partnership on those issues.

In the budget they have introduced, the Taoiseach and the Minister for Finance have breached the fundamental foundation of partnership in a profound way. By moving this motion, Fine Gael is seeking to start the process of putting this right. Fine Gael will continue to promote its own policies on taxation, which are fair and just. We will oppose this unravelling budget every day between now and the passage of the Final Stage of the Finance Bill. Throughout the Finance Bill we will table amendments to reverse the unfair and divisive character of the budget. We will discuss these amendments with the Independent Deputies, some of whom have already expressed deep-seated unease and concern about the budget.

In the unlikely event that the Government manages to translate its Finance Bill into a Finance Act, Fine Gael, on returning to Government – while maintaining the de facto position at the time, which may have been achieved by double-income families – will restore equity of treatment between families by the use of extra resources as they become available.

We do not believe it was necessary for the Government to be so divisive in the way it drafted this budget. Prior to the budget, Fine Gael published its own proposals whereby the extra cost of going out to work, borne particularly by women, could have been met by an increase in the PAYE allowance. Fine Gael also showed how it would be possible to take people who are currently paying the top rate of tax – and who should not be doing so – out of the top rate by increasing allowances and bands, and by introducing a 35% medium band. There are alternative ways of achieving what the Government sought, without creating the division and deep sense of hurt felt by those on low incomes. The latter group feels it has been ignored and that has created much difficulty for social partnership. In the most profound sense, the Government has shown itself to be politically unwise and out of touch in the budget it introduced. We hope a Government that can make such a mistake will not endure for too long.

Mr. Noonan

A group of strangers visiting Ireland at the moment would find it hard to follow what is actually happening. They probably would have been briefed by the IDA to suggest that social partnership was the bedrock on which our economic policy was founded. During their visit they would find the representatives of organised labour, business, the farming community and voluntary groups who form the fourth pillar in the partnership talks were all agreed that a new social partnership was desirable and that they would bend might and mane to negotiate a new agreement.

They would come to the Parliament and would find that the Opposition parties were totally committed to partnership. They probably would not be too surprised at that because they would quickly learn that the present partnership arrangement, Partnership 2000, was negotiated by the Opposition when in Government – principally by the then Taoiseach, Deputy John Bruton, and the then Minister for Finance, Deputy Quinn.

However, they would be amazed that the Government, which would claim that social partnership was the bedrock of its economic policy, could not have done better to undermine it if it had set out to do so. The budget has undermined social partnership, not only because of the elements of the budget itself, but also because of the manner in which the retreat from Dunkirk was organised and executed, and principally by the philosophical or ideological base on which the budget was founded.

We are left with a situation where the partners – who, I hope, will negotiate the next agreement – like the country at large, have no confidence in the Minister for Finance or his colleagues in the Cabinet. Members of the Cabinet seem to be able to absolve themselves of blame by saying that on the one hand they were not consulted at all or, on the other hand, they were consulted but they said that this would never work. Twelve Cabinet members are running from the noise of battle, blaming their Taoiseach, their Tánaiste and their Minister for Finance. This is a Cabinet which is supposed to be operating on the constitutional principle of collective responsibility, yet its members are running in all directions. Is it any wonder that the putative strangers visiting our shores would find that the Cabinet is totally out of touch with what is going on and is another group of people who are undermining social partnership. They certainly would have no confidence in the Taoiseach.

Since Saturday, I have read articles by distinguished journalists in numerous newspapers suggesting that the resources of the Fianna Fáil Party, of which the Taoiseach is president, were systematically used to organise Government Deputies on the plinth of Leinster House to give interviews to undermine the Government's own budget. That has not been contradicted in public by either the Taoiseach or the Tánaiste.

Mr. Quinn

His press office was out there, ushering them in and out.

Mr. Noonan

It is absolutely outrageous that the Taoiseach of the day should undermine the budget put forward by his own Minister for Finance for some devious, cunning or tactical political reasons. I believe it is actually unconstitutional. The Taoiseach would be following the path of the late President Nixon at this stage if we had such procedures in this House and if we had a more rigorous democracy in this country. It defies belief that a Taoiseach would set about systematically undermining his Government's budget.

The strangers visiting our shores would have a very peculiar view of how the country is organised and managed by the Government. They might not be too surprised, however, when they read the budget. This was an ideological budget, drawn up by a number of politicians who were frustrated in the 1980s when Mrs. Thatcher's conservatism and economic management were in vogue. In a kind of revisiting of the past, they have now imposed a 1980s conservative English budget on the Irish electorate.

Mrs. Thatcher is infamously reputed to have said there is no such thing as society. Those who drew up this budget have a similar idea that there is not really a society, that Ireland is not organised into family units, that communities do not really matter, whether in the cities or small rural communities, that the basis of society, if it exists at all, is simply a series of individuals and the management of a country is the management of the future of individuals making free choices in a free market. In this view, everybody is either "economic man" or "economic woman" and one caters for their economic needs, blows the whistle, lets the race commence and there are no other consequences.

The problem with that theory is that one cannot believe in it and in social partnership at the same time. It is not possible to have the two concepts in one's head. It is not possible to run a Government on such diverse principles. The idea of partnership is that there is such a thing as society and that people who are opposed in the workplace, such as employers and unions, come together and compromise for the good of the country, their members, families and society as a whole. That essential nature of partnership has been totally forgotten by the people who organised this budget. It is no wonder that, as the budget was seen to fail, partnership also cracked. It is not possible to build partnership on this budget.

The extraordinary decision to ignore the needs of low paid persons in the budget was socially unjust. From a negotiating point of view, it was extraordinarily short-sighted. Anyone approaching partnership talks this year would have known that the introduction of the minimum wage in April would create a new benchmark. It was quite clear there was going to be a demand to exempt the minimum wage from income tax. It was also quite clear that if there was not a statement of intent to make significant progress towards that in the budget, the unions' response would be to look for a higher minimum wage.

The unions' position is quite clear and is driven by the needs of their low paid members – if they are not going to get it in tax breaks they will have to get it in higher nominal wages. Everybody knows that is the negotiating position. One does not need to have been involved in social partnership talks in the past to work that out. It is also crystal clear that IBEC will strongly resist an increase of the minimum wage before it is introduced. It was quite foreseeable that the decision to move the exemption limit on income tax only from £100 to £110 would wreck social partnership and make it extremely difficult to deliver a deal because there would be an immediate demand for a higher minimum wage and, as a consequence, the trade union movement and IBEC would be thrown into unnecessary conflict.

That is the current position. We saw what happened when the leaders of SIPTU withdrew from the talks on the low pay issue. They were left in an impossible position by the Government. The Taoiseach, if we are to believe the profiles we read of him, regards his skill in negotiating partnership deals as his forte among all his portfolio skills. I cannot understand why he went with a minimum increase of the level of wages at which one enters the tax net when the consequences were so foreseeable.

As Deputy John Bruton pointed out, Fine Gael is committed to exempting the minimum wage in its totality from income tax. We know what that will cost. When I costed an increase from £100 to £170 with the Revenue Commissioners and the Department of Finance at the end of September, it came to £1.1 billion. That is a lot of money. Many people think that when one talks about exempting the first £170 of income from tax it only applies to people earning £170 a week but, of course, it applies to all income. I presume the removal of £10 has brought it down to £1 billion, or so. There is a big price to be paid and the same money cannot be spent twice. Once the money is spent, one must decide what one is going to do for the future.

The second issue which I want to address is individualisation. In the tax policy proposed by Fine Gael, we recognised that there are different costs where two people in the same house, rather than one, go out to work. We said that, in some way, the PAYE allowance already reflects that difference. However, the PAYE allowance is no longer sufficient, especially with the changes that were made to it last year by applying it at the standard rate only, which had the effect of reducing it. We proposed that the PAYE allowance should be increased to £3,600. That would have been an effective margin.

I cannot see where the Minister's proposals on individualisation originated, unless they came from the former Deputy McDowell, who is now the Attorney General. He is the only one I remember making any argument about individualisation during various financial debates in this House over the years. The Minister, defending his budget on the night it was announced, and, subsequently, the Taoiseach claimed they were basing their proposals on Tim Callan's article in the ESRI report published on 27 September. However, I read that article and what Mr. Callan and his friends said is not what was done in the budget. Mr. Callan took the opportunity to write an article in The Irish Times, saying that, wherever the Government got the notion, it did not get it from him and he was not going to take the blame for it. I do not know where it came from – it seems to have come out of a clear blue sky – but it was certainly a very bad idea.

As I said earlier, we all recognise that some differential is necessary between people who go out to work and those who do not, simply because it is more expensive. That could be reflected in the PAYE allowance. The gap in allowances in the first year between £28,000 and £34,000 might be bad – it is about £1,320 in terms of cash in hand – but when it is taken forward to the third year the gap is between £28,000 and £56,000. In very simple terms, a family with one income enters the higher rate of tax when its income passes £28,000 but a family with two earners does not enter the higher rate of tax until its income passes £56,000. That level of gap is not defensible, sustainable or explicable. It is no wonder the telephones were hot in Leinster House, with all of us getting calls from spouses who were seriously upset that their contribution to their homes and families by their decision to stay at home had been diminished to such a degree.

Mr. Yates

I support this motion. I have just come from a function and I remain amazed by the number of ordinary people who are still incensed by this budget. One would think it was politically contrived or some form of political opportunism, but people outside are far more apoplectic about the budget than Members of the House who are rational in debating and dealing with it.

The Government's approach to economic policy is in tatters. This budget hit a raw nerve of divisiveness between families on the same income and the same expenses but who are being treated differently, between spouses at home and spouses at work and between spouses in the home with children and spouses in the home with no children. With every move the Government makes people work out how their contribution has been valued. It is like playing pinball – the Government rolls the ball and decides that it will look at individualisation again and it might not last three years. Then the Government hits a red light and decides to introduce a £3,000 tax allowance. It then hits a green light and someone decides to do something about low pay, resulting in a package on FIS, qualifying adult allowances and so on. Then someone else decides to do something about child benefit. However, we know that the ball will end up down a black hole at the end of the day.

No budget has ever given away so much money, yet none has been so systematically undermined by Government backbenchers and been treated with such derision. An employer can give an employee £10 for a drink and he would be delighted, but could give someone else £50 and insult them. This Government seems incapable of managing expectations or explaining its philosophy to ordinary people.

Fine Gael outlined its tax proposals last September, long before a successor to Partnership 2000 was discussed. The package was worth £2 billion and was criticised for being overly generous, but we stated that it would have to be implemented over two or three budgets. Great credit is due to Deputy Noonan for his imagination, flair and leadership on this issue. We said that 200,000 people had to be taken out of the tax net which would mean raising the limits, not just on exemptions, but on the basic personal tax free allowance of £170 per week. All income is now reckonable for tax purposes, including social welfare payments, and our proposal is equitable, just and fair.

We have heard much about women at work, the majority of whom work part-time. About 20,000 women work between one and nine hours per week and 60,000 work between ten and 19 hours per week. These women are preponderantly on low pay. Shops everywhere are advertising for part-time and full-time staff and I cannot understand why no one in the Government concluded that the key issue in terms of moving people from welfare to work is that gross pay should be the same as net pay for low paid workers. That is what is required to get people into employment, to fill the vacancies and to ensure equity. No one will work for less than £5 per hour, therefore, how can one take £35 in tax from a weekly pay packet of £180 or £190?

In addition, there is the issue of the changes made to meet the ire and the wrath exposed. Due to individualisation, the concession for double income families is £1,300. The value of the stay-at-home spouse is £660 – they are worth only half under the Government's proposals, which are being made up as we go along. However, the 30,000 spouses in the home, many of whom are in their fifties and have spent years rearing the cubs of the Celtic tiger, are now valueless – they are worth nothing. Their parents are probably deceased and they have been relegated to the Vauxhall Conference.

As well as the basic provisions on low pay, the jewel in the crown of Fine Gael's proposals was the provision that top income earners should pay a top rate of tax and that is it not unreasonable for someone on a very high income to pay 46p in the pound. We need to introduce a new middle rate of 35% for £50,000 earners and double that for double income families, under the Murphy case. This would ensure that moderate income earners pay moderate tax rates and would deal with the position where a single person used to pay the top rate on £14,100 per year. This proposal is a more intelligent way of dealing with middle income families and would have been more attractive to people who are in the position where one spouse is using all the tax allowances and they wonder what tax they will pay if the second spouse takes a job. Such people would pay tax at 35%.

Fine Gael's basic proposal for an earned income credit would have introduced far more equity to the system and would have ensured the extension of the standard rate band to take 160,000 taxpayers off the top rate. However, the money used to reduce the top rate and to bring so many people to the standard rate has been frittered away in meeting that objective.

Fianna Fáil has always tried to create the impression that Fine Gael is opposed to partnership. It conveniently forgets that we are the authors of Partnership 2000 and that it inherited the economic success we laid for it. We have had over a decade agreements – Programme for National Recovery, PESP, PCW and Partnership 2000. These partnerships arrangements have worked on the basic premise that Ireland will become more competitive by trading off moderate pay increases for large net take home pay, based on the combined tax reduction approach. In so doing one increases net pay, improves competitiveness and sustains a massive growth in the workforce. Fine Gael favours the continuation of this policy. We launched our proposal when there was no general election in sight and it was designed to create a context and a basis for a successful conclusion to another partnership agreement.

Public sector pay is the second issue which needs to be addressed and which can only be dealt with by a partnership deal. We have an early 1970s formula for relativities which bedevils issues like nurses' pay, linkages to prison officers' pay and so on. We must have a merit-based society and a merit-based system for increasing pay, related to further qualifications and new technology in the public service. This would ensure that those who are earning and worth more would be paid more, as happens in the private sector.

This is the most divisive budget ever. It is unprecedented in its thoughtlessness and has humiliated and insulted women, many of whom are at work and aspire to starting a family and raising children. The budget has done nothing for the supply side of child care by way of capitation and many creches have closed under this Government because of bureaucratic red tape. There are many other opportunities offered by partnership to deal with hospital waiting lists and to have a Minister for Education, rather than a Minister for teachers, who would deal with the real issues of remedial education and equality of opportunity for young people leaving school.

However, all of this is caught up in a conundrum of Ministers briefing against Ministers. We are told that this is all good news because the Minister, Deputy McCreevy's leadership prospects have been terminated. However, these issues are too serious. The Government can run on auto-pilot and the economy will continue to grow for the rest of its short life. However, we need to sustain the boom for the next decade which will require, not an auto-pilot, but leadership, enhanced competitiveness and, most of all, fair play and straight dealing. This Government has used its smoke-filled rooms to deceive and cheat and in a most divisive way has put woman against woman and workers against those who stay at home. This is a turning point in the lifetime of this Government. It is, in effect, the beginning of the end.

Tánaiste and Minister for Enterprise, Trade and Employment (Ms Harney)

I move amendment No. 1:

To delete all words after "That" and substitute the following:

"Dáil Éireann

–noting the contribution which the process of social partnership, involving successive Governments, has made to national economic and social development in recent years;

–conscious of the importance of a successor agreement to Partnership 2000 being negotiated and agreed at the earliest opportunity;

–conscious of the Government's determination to continue to reform the taxation system to ensure that as many low paid workers as possible are taken out of the system altogether, and to remove middle income earners from the top rate of tax; and

–conscious of the Government's decision to introduce a national hourly minimum wage from 1 April 2000,

welcomes the Government's commitment to seek to implement the vision and the strategy outlined in the recent report of the National Economic and Social Council in a realistic and balanced manner through a new social partnership agreement, and supports the Government's efforts to conclude a new agreement with the social partners on that basis.

For the past 12 years, social partnership has played a crucial role in shaping our economic development. It has done so by supporting a competitive evolution of incomes which underpinned the transformation of the public finances and delivered low inflation. The consensus approach provided stability and confidence and facilitated high levels of investment and jobs growth. Through its inclusive structure, social partnership has supported an ambitious approach to social policy, especially the tackling of unemployment. With the Programme for National Recovery in 1987, social partnership was born. It was not easy but through sacrifice, compromise and discipline, the tide began slowly to turn. Irish people dared to hope again – for themselves, and for their children.

Mr. Yates

Are copies of the Tánaiste's speech available?

Ms Harney

They will be. I am delighted the Deputy is interested in reading it.

Mr. Yates

Bedtime reading.

Mr. D. Carey

Hardly so far.

Mr. Yates

Compulsive reading.

Ms Harney

I remind Deputy Yates that since 1989, 24 points have been taken off tax rates and 23 of them were taken off by a Fianna Fáil-Progressive Democrat Government.

Mr. Yates

Allowances and bands are important as rates.

Ms Harney

A great deal of what the Deputy said does not stand up to scrutiny. Our achievements over 12 years of social partnership have been spectacular by any standards. The national debt-GNP ratio has dropped from a massive 125% to just over 50%, inflation during the partnership years has averaged a rate of only 2.8%, compared to an equivalent rate of 11.7% in the decade before, and the public finances have moved from a point of deep crisis to a level of buoyancy unprecedented in our history.

It is particularly revealing to look at the position with regard to real take-home pay. Money wages increased by 21% a year in the ten years to 1988, but real take-home pay fell by 14% between 1980 and 1987. By contrast, since 1988, money wages have risen by 4.5% per year, but real take-home pay has increased by 35%. These statistics are impressive but the social and economic transformation of the last 12 years is most evident of all in the areas of employment and unemployment. There are half a million more people in work now than in 1987. The total number in employment is almost 1.6 million – the highest level ever in the history of this State. Who, at the outset of social partnership, could have predicted such progress?

We live in a competitive world. We cannot be complacent. Our success depends on our ability to cope with the competitive challenges of the international marketplace and social partnership can give us the edge needed to cope with those challenges. Four partnership agreements have helped to bring us to prosperity and economic success – a fifth can help us to deepen and to share that success. This Government is strongly committed to the principle of partnership. We want to negotiate a new accord and we will make every effort to do so.

One of the key objectives of successive national agreements has been the creation of an inclusive society. This is an objective to which the present Government strongly subscribes and our record on this front is impressive by any standards. In the period since the Government took office, the number of people who are unemployed has fallen by 75,000, the unemployment rate has been halved and the level of long-term unemployment has fallen dramatically. In fact, the most recent quarterly national household survey shows that only 2.5% of the workforce is now classified as long-term unemployed, down from 5.5% in mid-1997.

That is progress but we're not satisfied with it. We can now achieve the effective elimination of long-term unemployment within the lifetime of this administration and that is the target which we have set ourselves in the review of the programme for Government. It is an ambitious target but the sustained strength of the Irish economy means that we can now afford to be ambitious. The value of economic success will be lessened if there are still over 40,000 people effectively excluded from the advantages and opportunities offered by participation in the workforce.

The Government has also worked hard to ensure that work is worthwhile. We have delivered significant increases in take-home pay by reducing substantially the burden of tax on all those who work for a living. The parties opposite talk a great game on tax reform.

Mr. Yates

We are not on the plinth.

Ms Harney

It is a great pity they did so little about it when they were in office. As I said to Deputy Yates, 24 points have been taken off the tax rates in the past ten years, 23 of them during the lifetime of a Fianna Fáil-Progressive Democrat Government. It is quite remarkable that the parties opposite did so little to move people on modest incomes out of the top-rate net and people on low incomes out of the tax net altogether.

When the Government took office two and a half years ago, a single person entered the tax net at just £77 a week. Two and a half years later we have brought that figure up to £110 a week, an increase of over 40%. When the Government took office a single person became liable for the top rate of tax at just £261 a week. We have now brought that figure up to £327 a week. When the Government took office a person on average industrial earnings faced a marginal tax rate of 48%. We have now brought that down to 22%. It is important to note that these tax reductions were not paid for by cuts in social services – quite the contrary. We have demonstrated in this country that when one improves incentives one can stimulate additional economic activity and generate resources for the Exchequer. One can reduce taxes and raise revenues. We have certainly proved the incentive power of low taxation.

This has enabled us to invest enormous resources in developing our social services and improving state supports for the more vulnerable sections of Irish society.

Mr. Yates

£4 a week.

Ms Harney

Nowhere has this been more evident than in our approach to older people. For years old age pensioners had to put up with miserable increases which did little or nothing to improve their standard of living. Over three budgets from 1995 to 1997, the rainbow Government increased the basic rate of the old age pension by a total of £7.

Mr. D. Ahern

Shame.

Mr. Yates

I heard "Questions and Answers" did not go well. I did not see it but I heard it was a rough ride.

Ms Harney

In contrast, this Government has increased the old age pension by £18 in three budgets. We are well on course to reach our target of £100 per week in next year's budget – in fact we should be able to exceed it comfortably.

Mr. D. Carey

Why did the Government not give it to them for the millennium?

Acting Chairman (Mrs. B. Moynihan-Cronin)

The Tánaiste without interruption.

Ms Harney

£7 in three years against £18 – that speaks for itself.

Mr. D. Carey

The Government is generous. It is like Santa Claus. Why did it not give it to them for the millennium?

Mr. D. Ahern

It speaks for itself.

Acting Chairman

The Tánaiste without interruption.

Mr. Yates

This is a reality check.

Mr. D. Ahern

The Opposition did nothing.

Ms Harney

We have made great progress in our first three budgets and we will make much more in the next two.

Mr. D. Carey

Just look at the cross-Border bodies – three for Dublin and where was the Minister for Social, Community and Family Affairs?

Mr. D. Ahern

£1.80 – that is all the Opposition gave.

Mr. D. Carey

Nothing for Cavan and Monaghan.

Mr. D. Ahern

Miserable.

Acting Chairman

The Tánaiste without interruption.

Ms Harney

Social partnership is about consensus and agreement. If we cannot even listen to each other, what choice do we have?

Mr. D. Carey

Correct – I am prepared to listen.

Ms Harney

Deputy Carey is provoking himself.

Mr. D. Carey

I will not interrupt Deputy Harney again.

Mr. D. Ahern

The Deputy already did.

Mr. D. Carey

When Deputy Harney was on this side of the House, particularly when she was an Independent—

Acting Chairman

The Tánaiste has the floor.

Mr. D. Carey

—she came up with many ideas which wrecked the economy.

Acting Chairman

I ask Deputy Carey to resume his seat.

Mr. D. Carey

She is the only person in this House who knew about the flight of capital. She and the Minister of State, Deputy Séamus Brennan, knew all about the accounts held abroad.

Mr. D. Ahern

This is a disgrace. Will the Chair not give him a yellow card or perhaps a red one?

Acting Chairman

Will the Deputy resume his seat?

Mr. D. Carey

I produced the evidence in this House.

Mr. Yates

The Government should enjoy its time because it is running out.

Mr. D. Carey

Offshore accounts.

Acting Chairman

I ask the Deputies not to interrupt. Everyone will have time to speak.

Mr. Rabbitte

Where did she stand on the side of the Minister of State, Deputy Séamus Brennan?

Ms Harney

I know Deputy Yates occasionally gets confused about where he is but in reply to Deputy Carey, I was never an Independent Member of this House.

Mr. D. Carey

Did the Tánaiste not lose the whip?

Ms Harney

I was never an Independent Member.

Acting Chairman

The Tánaiste without interruption. Remarks should be addressed through the Chair.

Mr. D. Carey

I apologise.

Ms Harney

We have a democratic mandate to deliver certain improvements in the tax system and they will be delivered. The resources are now becoming available to do much more. I will be bringing in the national minimum wage from 1 April 2000. In three years the rainbow Government only managed to increase the basic tax free allowance for a single person by a miserable £550. On that basis it would take almost 20 budgets to exempt the minimum wage from tax. I am confident we can do a lot better during the lifetime of this Government. The time to reform the tax system is when one is in Government, not in Opposition.

Mr. D. Carey

The Tánaiste was handed a surplus.

Ms Harney

The parties opposite had their chance but did not take it. We intend to take ours.

Mr. Rabbitte

The Government had three budgets this year. It has delivered five budgets already.

Ms Harney

By the time this Administration has delivered five budgets it will have succeeded in transforming this country's tax system beyond recognition. Notwithstanding the criticism from Opposition parties that we reduced tax rates – we have done so in Government since 1989 – when they returned to Government they did not increase them again. The Labour Party increased rates by 1% on one occasion but they reduced it pretty quickly. Given that Opposition parties are against reducing tax rates, why do they not increase them when they get into Government?

Mr. D. Carey

The Tánaiste should compare apples with apples.

Acting Chairman

Deputy Carey, please.

Ms Harney

The major beneficiaries of that transformation will be the working people of Ireland, particularly the PAYE sector, whose acceptance of pay moderation in the early years of the partnership process paved the way to prosperity from which society and the economy has gained.

I spoke earlier of the first four partnership agreements, what they have brought us and where they have brought us, but what about the next agreement? What do we as a nation want it to achieve? Where do we as a nation want it to take us? Any new agreement must deliver responsible wage growth. Workers must benefit to the fullest possible extent from economic growth without compromising the competitive strength on which our prosperity is built. A new agreement must provide for gain-sharing in the workplace so that employees can benefit directly from the successful performance of the companies in which they work. Any new agreement must provide for a new approach to public sector pay determination, one that enables all those who work in the public service to share in the benefits accruing from change. Indeed, change and the management of change is likely to be one of the central features of any new partnership agreement. We live in a world which is changing at a breathtaking pace. We know that as much as 80% of technology will be replaced within ten years with new and better technologies. In the area of information technology software, the pace of change is even faster. In this environment modernisation is not an option, it is a necessity.

We must think in terms of opportunities, not obstacles. New technology can be the key to further national prosperity but we must know how to use it. It is estimated that 80% of those who will be part of the labour force in ten years' time are already in the workplace. Some 80% of technologies may be new but 80% of skills may be old. That means, potentially, a huge skills gap and a significant challenge for trades unions, businesses and for Government. That is the kind of challenge which can best be met by continuing the process of partnership.

I hope it is clear that I accept the important role that social partnership, together with other factors, including sound Government policies, have played in our economic success. This Government has honoured in full the terms of Partnership 2000. We did not negotiate that agreement but we recognised the importance of continuity and the value of the partnership process. Social partnership agreements have been seen as one of the competitive advantages of the Irish economy. Politicising the partnership process, by undermining confidence in the continuity of policy, is in no one's interest.

That is not to say that social partnership has replaced politics far from it. This and every Government has a duty to implement the democratic mandate it receives from the people. Partnership and democracy are not mutually exclusive. One can only operate successfully within the framework of the other. This has been true in Ireland for the past 12 years and there is every reason to believe it will still be true for the next 12 years. No Government can abdicate its responsibilities or its prerogatives derived from the democratic process. The National Economic and Social Forum observed the following in an important report on the partnership process:

In identifying the State's role in facilitating deliberation, information-pooling and action by other organisations, it is not implied that the State is neutral, or that it comes to issues without an agenda or interests of its own. The State is much more than a referee. Its democratic mandate and resources give it a unique role in the partnership process.

Deputy John Bruton, as Taoiseach, addressed the social partners on the opening of talks on Partnership 2000 in October 1996 by noting that the NESC and NESF had identified issues and made recommendations for a new programme. He went on to set down six priorities which his Government intended to pursue in discussions on a programme. Deputy De Rossa, as Minister for Social Welfare, told the Dáil in the same month that the NESC report brought valuable insights and that he would take the closest account of the council's views in developing social welfare policy – not that he would treat it as a holy writ.

The value of the NESC and the NESF in shaping the agenda for a problem-solving approach to social partnership has derived, in large measure, from the open and non-adversarial way in which reports have been prepared. This has enabled the members to go beyond the narrow defence of their traditional positions in shaping a strategic framework for policy and partnership. Real social learning and subsequent leadership have flowed from this approach. Members were able to prepare agreed reports precisely because they had flexibility to go beyond the defence of sectoral interest, without formally committing their organisations. That came later in formal negotiations against the background of the shared analysis of the reports.

The budget addressed one of the two core NESC recommendations on tax, namely, the relatively low incomes at which people enter the higher tax rate. The budget removed 125,000 people on modest incomes from the higher tax rate through the only means by which that can be done, as the NESC pointed out, widening the standard rate band. The budget also removed 72,000 people from the tax net altogether. The social welfare improvements represented the biggest package ever, with average rate increases of 5.5% reflecting the NESC approach to approximating increases to movements in average living standards. The dramatic improvements in funding for social housing and health care, especially for people with disabilities, are further evidence of a focus on social inclusion in line with NESC. One of the core priorities of the NESC was to make lifelong learning a reality. The dramatic improvements in education, more details of which will be announced by the Minister for Education and Science tomorrow, and the establishment of a national training fund, show that the Government's policy is in line with the NESC strategy.

I cannot accept that measures such as these breached either the spirit or thrust of partnership. I would make the general point that it is unrealistic to expect that all budgetary objectives can be addressed fully in just one budget. It is my firm belief that the budget achieved significant progress in the commitments my Government laid before the Irish people in our action programme and in the priorities identified by the social partners. Any problems are best resolved at the negotiating table. I believe that they can be resolved – I am convinced they will. In these negotiations, as both the Taoiseach and the Minister for Finance have made clear, we will address the development of tax policies that reflect the NESC strategy, as well as the Government's tax policy objectives. The Government wants to hear the social partners' views. The best forum, indeed the only sensible forum, for that process is the negotiating table on a successor to Partnership 2000.

One of the principal recommendations of the NESC was for a negotiated consensus that includes agreement on pay, tax reform, the public finances, infrastructure, housing and policies to address social exclusion. I find it hard to understand how anyone concerned about low pay could seriously suggest abandoning social partnership in favour of a pay free-for-all, with all that implies. When the Taoiseach, the Minister for Finance and I met the social partners on 9 November, we outlined our support for implementing in a realistic and balanced manner the vision and strategy set out by NESC in the context of negotiating a new partnership agreement. The Taoiseach reaffirmed this commitment to the social partners last week. We want to see its vision and strategy progressed to fruition.

In framing the recent budget, the Government took account of its policy programme and mandate and the NESC report. In due time, the value of measures taken in the budget will be recognised in a way that has been obscured by current controversy.

The trade union movement came to the partnership table in the late 1980s, when times were hard and when it was recognised that things would have to get worse before they got better. All that has changed now. We have unprecedented resources available to us. We have problems – problems of inequality, marginalisation, exclusion and deprivation – but we have the wherewithal at our disposal to solve these problems together.

I know that all the social partners want to play a part in shaping the future of this country as we move into a new decade and a new century. I extend an invitation to them to come and help us shape that future together.

Mr. Quinn

Two weeks ago, on the eve of the budget, Government Ministers and backbenchers could hardly contain their excitement. The Minister for Finance stood poised to deliver his budget against the background of the most favourable economic circumstances in the history of the State. This would be, they assured everyone who was prepared to listen, the most popular budget in the history of the State. There would be something for everyone. Every sector would be looked after and nobody would be disappointed or even feel left out. Nobody could deliver an unpopular budget in these circumstances. This was the budget that would set up Fianna Fáil and the Progressive Democrats for re-election whenever the next general election might come. Can I say at this juncture that I propose to share my time, with the agreement of the House, with Deputy Rabbitte?

Acting Chairman

Is that agreed? Agreed.

Mr. Quinn

When the Minister concluded his speech on 1 December, the same backbenchers who either had not been listening or who had been taken in by their own pre-propoganda, or who failed to understand what Minister McCreevy said, cheered him to the rafters and rushed out to announce the good news to their constituents. Has there ever been a budget that has been so misjudged by a Government and its Deputies? Two weeks on, it is clear that the budget introduced by Minister McCreevy has been the most inept, ill-judged, socially divisive and unfair budget in the history of the State. The only competitor who comes close is Ernest Blythe.

The principal victims of this budget have been the poor, those dependent on social welfare, those on low pay whose interests were virtually ignored by Minister McCreevy and those parents who choose to work in the home and who were told by the Taoiseach, the Tánaiste and the Minister for Finance that their interests simply do not rate with this Government. In case there is any misconception, I am referring to budget No. 1. Budget No. 2 has some references to people at home and budget No. 3 will have something else, but since this debate is confined to budget No. 1, I will refer to that.

There have been other casualties in this budget No. 1, including the political reputations of the Taoiseach, the Tánaiste and the Minister for Finance. The position of Minister McCreevy is simply without precedent in Irish politics. He grossly misjudged the mood of the country, the trade union movement, the Dáil and even his own party, as the procession of penitents to the plinth clearly manifested. He introduced a budget that he was incapable of getting through the House.

Ms Harney

He got it through the House.

Mr. Quinn

He did not. It has not yet been voted upon. The core feature of the budget has already been substantially rewritten, and it is clear that it will be subject to even more substantial revision. The Dáil finds itself in the ludicrous situation of having to spend a week debating a budget, budget No. 1, that no longer applies because we are now dealing with budget No. 2 and we are promised budget No. 3. We are resuming debate tonight on a budget that we know will be changed yet again. Quite frankly, in any other country, a Minister for Finance who so misjudged the situation and who was responsible for creating this fiasco would have long ago resigned in shame.

Mr. Yates

He should do the honourable thing.

Mr. Quinn

The reason he will not do that, and why he is still in office, is that the Taoiseach shares the blame for this botched budget and the attempts by him to distance himself from his Minister for Finance, not for the first time, simply will not wash. The Taoiseach and the Tánaiste were clearly aware of the budget provisions and would have been required, even under this coalition Government structure, to give their stamp of approval to them.

Anyone who knows anything about the political record of the Minister, Deputy McCreevy will not be surprised that he would attempt to introduce such a regressive, discriminatory and simply unfair budget. From my analysis, at every point in his political career, when Deputy McCreevy had the choice of assisting the poor or featherbedding the well off, he has always chosen to back the rich. As Minister for Social Welfare, he cut a swathe of destruction through the social welfare system with his infamous "dirty dozen" cuts. In his first budget he introduced a package that shamelessly backed the well off by cutting the upper rate of tax and a series of other measures, including the halving of capital gains tax.

Ms Harney

And trebling the revenue.

Mr. Yates

What would it have been?

Mr. Quinn

Which meant that a small number of people got a windfall of £300 million. That is my point.

Mr. Yates

With the Celtic tiger that could have been doubled.

Ms Harney

They got more money.

Mr. Quinn

Similarly, nobody will be surprised that the Tánaiste approved a budget like this. After all, she has previously spoken of her belief that a low wage, low regulation economy like Hong Kong could be a model for this country—

Ms Harney

I never said that.

Mr. Quinn

—and she has made single mothers and public servants the principal targets of her last general election campaign, but the Taoiseach is a different matter. He is, allegedly, a politician who has built—

Ms Harney

The Deputy defended the amnesty up to six weeks ago.

Mr. Quinn

—a reputation for being all things to all people and who has had a particular relationship with the proverbial ordinary man in the street, a man who knows what it means to be less well off or low paid, a politician who rejected the confrontational approach and who has always worked for consensus. He has built a carefully crafted reputation as someone who knew and understood the trade union movement. He was regarded as having an infallible political nose—

Mr. D. Carey

At what cost?

Mr. Quinn

—as to what would or would not be politically acceptable.

Mr. Yates

A great man to sign cheques also.

Mr. Quinn

He is, after all, the politician described by his mentor, Mr. Charles Haughey, as the most cunning, the most devious of them all. The Minister for Social, Community and Family Affairs, Deputy Ahern, who is sitting beside the Tánaiste, might have some reason to believe the truth of that particular observation.

Mr. Yates

It is the last time he will be going to London.

Mr. Quinn

What are we now to make of this carefully crafted reputation? It is a fraud. The fact is that his reputation is in tatters. He approved a budget that was designed to benefit the bottom 10% of earners in this Republic by just 0.7% but which benefited the top 30% by a margin of between 3.7% and 4.4%. He approved a budget that improved the position of a family with two children earning £10,000 per year by just £2.15 per week – dare I say it, not even the price of a pint of Bass – while a similar family earning £40,000 per year would benefit by up to £43 per week.

The advent of information technology means that the implications of any of these possible alternatives, variations or decisions instantly factor onto the table of decision makers, so ignorance cannot be pleaded by the people who made these decisions. This was no mistake. This was a deliberate, socially divisive ideological choice that was made by this triumvirate, if I can be marginally sexist, of the Taoiseach, the Tánaiste and the Minister for Finance. The Minister for Finance approved a budget that told the majority of those on social welfare that, despite our unprecedented economic success, the best he can do for them is an extra £4 per week.

I know the Minister for Social, Community and Family Affairs and others will point in absolute terms to the substantial increase that has occurred between this year and last year and previous years, but let me put the other side of that numerical equation on the table. When I succeeded the then Minister, Deputy Bertie Ahern, as Minister for Finance, there was an unexpected surplus of £15 million in the current account in this month five years ago. Revenue had exceeded that of expenditure in the current account by £15 million. This year, going into the year 2000, the projected current budget surplus is £4,850 million. On top of that there is a pension fund provision of approximately £4 billion, and there are contingency sums of the order of £175 million or £180 million over the next three years. To compare the kind of increases that are trumpeted as being wonderfully substantial in terms of overall money simply ignores the totally different standpoint from which this budget could have been constructed as it was just over five years ago.

Mr. Yates

That is the point.

Mr. Quinn

The series of inspired newspaper stories over the weekend suggesting a rift between the Taoiseach and the Minister for Finance and of the Minister being called to heel by the Taoiseach was a clear attempt to distance the Taoiseach from this fiasco. Of course, the Taoiseach is publicly backing the Minister for Finance, which is the very time the Minister needs to watch out.

Mr. Yates

Deputy Ellis found that out.

Mr. Quinn

Deputy Ellis found that out but prior to that not only did the Taoiseach back Deputy Albert Reynolds for the Fianna Fáil nomination for the Presidency, he even showed him his vote. I hope he does not have to show the Minister for Finance his vote in the next couple of weeks.

One of the most serious effects of this budget has been the damage it has done to the spirit of social partnership which has undoubtedly served the economic interests of this country for 12 years. In one fell swoop, the Taoiseach, the Tánaiste and the Minister for Finance have done more damage to social partnership than excessive wage demands or employer greed. It was always clear that if there was going to be a new agreement, it would have to be very different from those which had gone before it. There was widespread acceptance that an agreement, negotiated in conditions of unprecedented economic success, would have to be very different from those agreed when the economy was on its knees. Everyone knew there would be difficulties negotiating a successor to Partnership 2000 but this budget has made that task immeasurably more difficult.

The reason the talks are in crisis and that the largest and most representative trade union has withdrawn from them is that the unions believe they have been misled and betrayed by the Government, in general, and the Taoiseach, in particular.

Mr. D. Ahern

The Deputy misled.

Mr. Quinn

They believed the Government was committed to the general approach and strategy set out in the recent NESC report, Opportunities, Challenges, Capacities for Choice, and particularly the key recommendation that incomes tax cuts should focus on the lower paid. They had every reason for so believing. The Taoiseach said in the House on 17 November: "I generally accept what is in the report." The unions and the social partners believed the Taoiseach when he said after the meeting of the Fianna Fáil parliamentary party in Galway last September that reducing the top rate of tax would not be a priority in the budget and they believed there was a general consensus between the Government and the social partners on the way to proceed.

Mr. D. Carey

Send for Michael McDowell.

Mr. Quinn

The Government proceeded to smash the consensus which had been carefully built up by introducing a budget which was in direct conflict with the strategy outlined in the NESC report and the understandings at which the trade unions believed they had arrived.

Why did the Taoiseach not take a stand against the McCreevy-Harney axis which was clearly allowed to dictate economic policy in the run up to the budget? Why did the Taoiseach allow the Tánaiste and the Minister for Finance to insist on reducing the upper rate of tax at a cost of £156 million when this money could have funded an extra £12 to £15 in child benefit giving a total increase – I am sure the Minister for Social, Community and Family Affairs would have been in favour of this – of between £20 and £25 per month. The reason those choices were not made and that this was a purely ideologically driven decision that no representative group, not even IBEC, had sought—

Mr. Yates

He was not consulted; he is not to be blamed.

Mr. Quinn

It gets worse. Did the Taoiseach not balk at the proposed changes to capital gains tax and capital acquisitions tax? Did he not recall the reaction to the CGT changes in the Minister's first budget? Does he not think it unfair that the highest tax rates in the Irish system apply to labour and labour only? As an accountant, he must be aware of the excitement being caused in accountancy circles about the changes to the application of CAT with respect to residence and domicile – Fianna Fáil and the Taoiseach are no strangers to attempts to muddy the waters in respect of residence and domicile. I advise the two Ministers present, the Tánaiste and the Minister for Social, Community and Family Affairs, to watch with a magnifying glass the small print which will appear in the draft of the Finance Bill because there is a raid of unprecedented proportions being connived and hatched as we sit innocently here before Christmas. I say it to them in all solidarity that this is not the first time these requests have been made. The confusion in the wording and the ambiguity in the wording of the Minister for Finance's speech, which is all we have to go on, signals to some of us who have some experience in these matters that there is something much more substantial being contemplated.

My colleague, Deputy McDowell, described this budget as immoral. His words are true and I agree with them. Commentators in Irish politics have for some time talked about all-party consensus on issues. The extent of the consensus coincides with a shared belief across the House in social partnership. However, let us not confuse consensus with partnership; let us not confuse a willingness for two different points of view to compromise with some overall consensus. I always held the view that the extent of that consensus has been exaggerated. For example, my party's proposals for tax reform this year differ substantially from those of the Minister's and Deputy Noonan's.

There are clear choices to be made about the future direction of Irish society and the one positive result of this budget has been that it has provoked a serious debate about our social priorities for the future. It is a debate we need to continue and intensify. The type of compromise represented by 12 years of national agreements is simply over if the Minister's divisive and damaging social engineering is allowed to dictate Government economic policy. If the Taoiseach is serious about seeking an agreement to replace Partnership 2000 then he must clearly reject the McCreevy-Harney approach, accept that the budget has been unjust and a gross breach of faith and send it back for total redrafting.

Mr. Rabbitte

This is a strong ideological Minister. Deputy Quinn dealt with that in some detail but we need to put into the context of the debate we are having about social partnership to understand how strongly held his views are. On the one hand, he and his Government say social partnership is the cornerstone of their economic policy and at the same time, his ideological recklessness in bringing in this budget has put social partnership at risk. This is a viciously anti-low pay, anti-poor budget.

I listened with some interest to the Tánaiste's justification because she sees this as vicariously her budget. I heard her play around with statistics and so on. The fact is that one has to contextualise it. To be honest, it did not matter who was Minister for Finance or who was Minister for Social, Community and Family Affairs because the phenomenal growth and expansion we have seen in the economy for six or seven years would have continued unless some daft decisions were made by whatever Government was in office. The result is that this Government finds itself in a sit uation where it has moneys to give back to the people, the like of which we have never seen in the history of the State. Notwithstanding that, this Minister decided to do so in a fashion which is manifestly so unfair that it has provoked the outcry outside this House which we have seen over the past week and the withdrawal of the largest union from the talks.

The Taoiseach has gone to extraordinary lengths to distance himself from the budget. We are only short of seeing him in the Glen of the Downs up the trees with the eco-warriors, because he has a certain amount of expertise in the area from his time in north Dublin going up and down the trees in relation to issue the Minister for Social, Community and Family Affairs was trying to examine in London. Given his experience in trees, one is surprised not to find him in the Glen of the Downs. I looked back at speech on the budget last year and if I did not say who the speaker was, one might have thought it was either the Tánaiste or the Minister for Finance. The Dáil Official Report for 3 December 1998, column 1579, shows the Taoiseach said the following about the budget: "The higher earner can look forward to future budgets under this Government which will ease a burden heavier than in most other countries."

The Taoiseach predicted clearly that there would be future budgets from this Fianna Fáil-Progressive Democrats Government which would be biased in favour of higher earners and for him now to try to get out from under this and try to blame Deputies Harney and McCreevy is less than fair. Last year the Taoiseach was speaking to the House in the context of some of the damage the Minister for Finance did the previous year being undone in the sense that last year's budget was reasonably equitable, given its paternity. However, the Taoiseach put the extract I have read out on the record of the Dáil the next day, promising the better off that they would live to see better days under his Government. How can he then pretend to be a semi-detached member of the Government and that he had no involvement with the budget? He told Des Geraghty and Peter Cassells that the budget was lacking in balance. Then, just in case the Tánaiste thinks she and Deputy McCreevy are to be unleashed on the social partners, the great conciliator made it clear – at the same meeting with the social partners – that he would intervene and that the job was oxo; he would ensure that the lower paid were looked after and he would handle the forthcoming pay talks.

Mr. Quinn

A more hands on approach.

Mr. Rabbitte

A more hands on approach, if there are national pay talks. Let us be clear, John Dunne of IBEC made it clear that there could not be pay talks of any significance without SIPTU's involvement. That union has more than 200,000 members, almost half of whom are on relatively low pay. To pretend one could organise a new social contract in the absence of the country's largest union is to fool oneself. IBEC is not fooling itself; that organisation is on the record regarding this matter. There will not be a new agreement unless there is another change in the budget to address the issue of low pay. That will be budget No. 4 in one month. We had what Deputy Quinn referred to as budget No. 1, then we had the attempted renovation for stay at home spouses. We then had a social welfare package and we will now have to have a package for the low paid.

This is very discriminatory. One could do what the Tánaiste did with figures and make the point in such a graphic way that it would not have much reality in the real economy or society. However, suppose one took a figure that is not unrealistic? Average industrial earnings will be £17,000 at the end of Partnership 2000 and that is a reasonably high figure if it is the average. A single income married couple living on those earnings stands to get £7.15 per week under Deputy McCreevy's budget. Despite the figures given by the self-employed – it is amazing how few people earn more than £25,000 per year in the self-employed category – there are many people on £50,000 a year. It is a rough economy to survive in. People earning £50,000 per year were given £31.17 per week by the Minister for Finance. No matter how one does the figures, the situation is that the higher earner gets at least three times more than the person on low income, with £7.15 being given to someone on average industrial earnings and £31.17 being given to those on £50,000 a year.

This year £10 per week was given in personal allowances, which, before the budget, was the area where everyone agreed some positive advantage could be conferred on those on low incomes. However, the same Minister produced £21 per week in personal allowances last year. He did his own thing in his first budget, which also discriminated seriously against the low paid. He was hauled back last year as a result of the outcry, but he got off the leash again this year and the extraordinary situation arose wherein no other Cabinet Minister, we are told, was involved in this decision. What kind of Government is this when such a matter was regarded as a detail? Fair play to the great survivor, Dr. Woods. His spin doctor did the best job last weekend; Dr. Woods identified the problem first. No sooner did the Minister read out his speech than Dr. Woods saw the gaffe. He whispered it to the Taoiseach and the Taoiseach became gloomy immediately, understanding he should have nothing to do with it.

However, his junior comrades did not see it at all. The Minister for Health and Children was heckling my party leader, saying: "You do not know what he is talking about." It is quite clear that Deputy Cowen did not know what he was talking about, but he knows now, as does the entire Front Bench.

Mr. D. Ahern

The Deputy is incorrect.

Mr. Rabbitte

It looks like we are going to get some new information, as Deputy Ahern seems to be indicating he knew something about it. That is an extraordinary admission.

Mr. D. Ahern

The Deputy is incorrect.

Mr. Rabbitte

One wonders how the Minister for Social, Community and Family Affairs, if he knew, could not have forewarned his colleague.

Social partnership is put at risk by the ideological drive behind this budget. It seriously discriminates against the lower paid and that discrimination cannot be made up for in pay talks. The majority of Mandate's members are on low pay and one third of SIPTU's members – more than 70,000 people – are on low pay and I cannot see how one can structure a new social contract in a fashion that positively advantages low income earners sufficiently to cause them to accept it in a ballot subsequently. The place to do that was in the tax code, where it was eminently feasible. A number of alternative systems for doing so had been outlined in advance of the budget and there appeared to be consensus on those systems across the entire spectrum of opinion from IBEC to Fr. Seán Healy.

I am sure I have mentioned someone close to the Minister's heart. I know how close Fr. Healy is to his Department.

Mr. D. Ahern

Very close.

Mr. Rabbitte

That consensus was ignored. The place to make sure lower paid people got advantages was in the tax code.

The Tánaiste has a mantra she rhymes off all the time about the national minimum wage; how she has brought one in and the previous Government did not. She has not brought one in, of course, but she has promised one. However, £4.40 an hour has been overtaken in the marketplace. If one looks in any shop in Grafton Street one will see they cannot get staff. Dunnes Stores has an advertisement in the newspapers for 1,000 staff and gave a voluntary 6% increase last Friday week, though it has taken strikes for six weeks for people looking for less than 6%. The £4.40 has been overtaken, but even at that rate, depending on the hours one works, one earns between £170 and £186 per week. If the Government has decided that that is to be the yardstick for a minimum income in this society, how can it decide that someone earning £109 per week should be taxed? That £9, from £100 to £109, was the decision taken in this budget. The resources the Minister for Finance had were skewed in favour of the better off.

Mr. Yates

The stay at home spouse was also skewed.

Debate adjourned.